Expert Speak Raisina Debates
Published on Jun 05, 2020
Why India is Australia’s economic and strategic imperative

While COVID-19 had delayed the Leaders’ Meeting between Prime Ministers Modi and Morrison until yesterday, it has only hastened the need for India and Australia to become much closer. The pandemic must not distract Australia from its imperative to significantly deepen its economic and strategic relationship with India.

While domestic issues have rightly taken priority during this crisis, the fact that the two Prime Ministers have invested in the Leaders’ Virtual Summit speaks volumes to the growing trust and significance in the relationship. Converging economic and strategic interests underpins both this connection at the highest levels of government, and the sizeable uptick in economic, defence and diplomatic activity over recent years.

Yet despite recent progress, there remains much work to do to realise joint ambitions for the relationship. For Australia, the task of elevating India as a top tier economic as well as strategic partner remains a work-in-progress. Strengthening the economic relationship will require not just converging interests and top-level attention, but sustained unity of purpose in both countries across the breadth of government and industry.

There are a number of reasons why around the world, the importance of secure, diverse and reliable value chains has crystallised in the COVID-19 crisis. Trade shocks and heightened risks in accessing critical products has led many to reappraise the resilience of their international economic ties. Initial community and government responses, in both Australia and India, have included widespread calls for greater security in supply chains, a spreading of risk across trading markets, and greater self-sufficiency in essential production.

However, it must be remembered that in a modern technological society, no country can meet all of its economic needs alone. Rather than turning inward, countries need to invest in more secure and reliable trade and investment relationships. There are growing opportunities for Australia to be a trusted provider of the materials and services India needs to meet its recovery and development needs. This includes supporting India’s ambition to build its manufacturing capabilities, particularly in the defence, energy and electric vehicles industries.

In turn, Northeast Asian demand for Australia’s minerals and energy resources, which has underpinned Australia’s economic growth for decades, will soon plateau. As a medium-sized open economy, Australia’s prosperity is dependent on being connected into the corridors of regional and global growth. As structurally one of the fastest growing large economies in the world, India is no exception, and Australia must further invest in India’s economy. Not only is it vital for Australian industry to closely examine India’s recent privatisation, deregulation and foreign investment announcements, but also work to jointly implement India’s upcoming Australia Economic Strategy.

Strategically, Australia’s advocacy of the Indo-Pacific concept centrally embraces the importance of India to the region. The Indo-Pacific construct not only recognises India’s growing economic and strategic weight, but also aims to support India’s further integration into the regional architecture. While the COVID-19 crisis has locked down economies, exacerbated great power competition and caused considerable human suffering, it is unlikely to bring about the demise of the Indo-Pacific. As Australia’s new High Commissioner to India, the Hon. Barry O’Farrell AO, recently posed to India’s National Defence College:

“If the pandemic is to have any influence on Australia’s strategy, it will be to accelerate the very trends that brought Australia and India so close together, and have shaped our approach to the Indo-Pacific.”

Creating institutions that strengthen the Indo-Pacific require greater Indian membership in the rules-based regional architecture. Therefore, just as it is important for Australia and other partners to intensify their advocacy for India to become a member of APEC, India must take seriously Australian and regional calls to join RCEP. An India further integrated with the region will enable it to enter a new stage in its industrialisation process, creating economic opportunities for Indians and Australians.

Yesterday’s summit saw a welcome elevation of the formal bilateral relationship, including commitments for Foreign and Defence Ministers to now meet in a “2+2” setting. Other agreements realised yesterday concern critical minerals and maritime cooperation, and would not have been possible but for sustained investment in the relationship. The next step in the bilateral relationship is to realise both the economic opportunities these agreements unlock, and the strategic benefits of closer Indian and Australian alignment.

The now-concluded Mutual Logistics Support Agreement (MLSA) enables reciprocal access to each other’s naval and military facilities, and increases the two countries’ capacity to operate together. While joint exercises are being delayed due to COVID-19, ongoing defence dialogue and the planning of future operations remains vital. Furthermore, it is essential to leverage the growing strategic trust between the two nations to increase defence industry and commercial cyber activity. The announcement of a new fund to ramp up joint cyber and critical technology research is significant in this regard.

In Australia and India, action to effect a slowed virus spread is enabling both nations to cautiously unwind restrictions and seek to kick-start economic activity. The road ahead will be challenging for both, but it will be smoother if traversed together. Australia is looking to India as a vital partner in economic recovery, and to meet each other’s long-term economic aspirations. There is much more work to do, and there is no time to waste.

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.